InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
SBA changes income calculations for self-employed PPP applicants
On March 12, the Small Business Administration (SBA) updated its Paycheck Protection Program (PPP) frequently asked questions to reflect recent changes allowing self-employed, Schedule C filers to use gross income to calculate PPP loan amounts. As previously covered by InfoBytes, SBA issued an interim final rule earlier this month implementing the calculation change for loans approved after March 4, 2021. The new FAQ includes options for lenders assisting filers who already applied for a PPP loan but who now want to use gross income to calculate their loan amount. Although some filers may update their calculation, SBA’s guidance states that if a lender “has disbursed the loan and filed the related Form 1502 Report reporting disbursement of the loan, no changes can be made to the loan amount calculation.” Additionally, SBA issued updated guidance on maximum loan amount calculations for First Draw PPP loans, as well as revenue reduction and maximum loan amount calculations for Second Draw PPP loans.
HUD approves settlement resolving Fair Housing Act violation
On March 8, HUD released a Conciliation Agreement between an African-American consumer and a mortgage lender to resolve allegations that the consumer’s home was appraised at an amount lower than its actual worth due to her race. Under the Fair Housing Act, a homeowner’s race may not influence the valuation of a home, HUD stated. While the lender denied having engaged in any discriminatory behavior, it agreed to pay $50,000 to the consumer and will provide mandatory training to all of its home lending advisors and client care specialists nationwide on the reconsideration of value (ROV) process and fair lending issues related to appraisals. Training will include information on how to handle complaints of discrimination in the appraisal process and the process for consumers to submit ROV requests.
UK FCA announces LIBOR cessation dates
On March 5, the United Kingdom’s Financial Conduct Authority (FCA) announced the dates that all LIBOR settings will cease to be provided by any administrator and will no longer be representative. All sterling, euro, Swiss franc and Japanese yen settings, and one-week and two-month U.S. dollar settings will cease immediately after December 31, 2021, while all remaining U.S. dollar settings will cease immediately after June 30, 2023. Following these dates, representative LIBOR rates will be unavailable and publication of most LIBOR settings will immediately end. The FCA stated it does not expect that any LIBOR settings will become unrepresentative prior to the aforementioned dates, noting that the announcement is intended to “provide certainty on when the LIBOR panels will end. Publication of most of the LIBOR benchmarks will cease at the same time as the panels end. Market participants must now complete their transition plans.”
Find continuing InfoBytes coverage on LIBOR here.
FinCEN issues antiquities and art warning
On March 9, the Financial Crimes Enforcement Network (FinCEN) issued an advisory notice alerting financial institutions with existing Bank Secrecy Act (BSA) obligations about illicit activity associated with trade in antiquities and art. As previously covered by InfoBytes, the Anti-Money Laundering Act of 2020 (AML Act) was enacted in January as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2021, and made significant changes to BSA and AML laws, including amending the definition of “financial institution” under the BSA to include persons “engaged in the trade of antiquities.” Among other things, FinCEN’s advisory notice updates financial institutions on AML Act measures related to the regulation of antiquities, noting in particular that the Department of Treasury, in coordination with the FBI, the U.S. Attorney General, and Homeland Security, “will perform a study of the facilitation of money laundering and the financing of terrorism through the trade in works of art.” The notice further warns financial institutions that crimes related to the trade of antiquities “may involve their institution” and could include the “sale of stolen or counterfeit objects,” as well as money laundering and sanctions violations. The advisory notice also provides suspicious activity report filing instructions related to trade in antiquities and art.
CFPB: Lenders cannot discriminate on the basis of sexual orientation or gender identity
On March 9, the CFPB issued an interpretive rule to clarify that ECOA’s prohibition against sex discrimination includes sexual orientation and gender identity discrimination. “This prohibition also covers discrimination based on actual or perceived nonconformity with traditional sex- or gender-based stereotypes, and discrimination based on an applicant’s social or other associations,” the Bureau stated. In 2020, the U.S. Supreme Court issued a decision in Bostock v. Clayton County, Georgia, holding that “the prohibition against sex discrimination in Title VII of the Civil Rights Act of 1964 encompasses sexual orientation discrimination and gender identity discrimination.” Following the Court’s decision, the Bureau issued a request for information (RFI) seeking, among other things, feedback on ways to provide clarity under ECOA and/or Regulation B related to the prohibition of discrimination on the basis of a sexual orientation or gender identity. (Covered by InfoBytes here.) Consistent with the Bostock decision and supported by many comments received in response to the RFI, the Bureau issued the interpretive rule to address any regulatory uncertainty that may still exist regarding the term “sex” under ECOA/Regulation B in order to protect against discrimination and ensure fair, equitable, and nondiscriminatory access to credit for both individuals and communities. The interpretive rule is effective upon publication in the Federal Register.
The Bureau also announced plans to review—and update as needed—publication and examination guidance documents to reflect the interpretive rule, and intends to take appropriate enforcement action against financial institutions that violate ECOA.
FTC, multiple states halt charitable telefunding operation
On March 4, the FTC, together with state attorneys general from 38 states and the District of Columbia, the secretaries of state from Colorado, Georgia, Maryland, North Carolina, and Tennessee, the Florida Department of Agriculture and Consumer Services, and the Utah Division of Consumer Protection (collectively, “plaintiffs”), announced settlements with a telefunding operation whose charitable fundraising calls allegedly collected over $110 million using deceptive solicitations. The plaintiffs’ complaint alleged, among other things, that the defendants engaged in deceptive fundraising by placing more than 1.3 billion prerecorded robocalls to convince consumers to donate to “practically nonexistent charitable programs.” The charitable organizations then paid the defendants typically 80 to 90 percent of every donation, the complaint states, noting that certain defendants knew that almost none of the donations would be spent supporting the charitable programs. The plaintiffs contended that these false or misleading actions violated the FTC Act. Moreover, in many instances, the plaintiffs alleged that the defendants knowingly violated the Telemarketing Sales Rule (TSR) by using soundboard technology to place the telemarketing calls. Using pre-recorded messages in calls to first-time donors is a violation of the TSR, the plaintiffs stated, as is using soundboard technology in calls to prior donors without first disclosing to recipients that they may opt-out of all future calls and providing them with a mechanism to do so.
Proposed settlements (see here, here, and here) reached with one group of defendants will, among other things, permanently ban them from engaging in any fundraising activities, conducting telemarketing to sell goods or services, or using existing donor information. The defendants will also be required to pay $110,063,848 each, which is either partially or fully suspended due to the defendants’ inability to pay.
Additionally, proposed settlements reached with the two fundraising company defendants and their senior managers (see here, here, and here) will permanently prohibit them from engaging in any fundraising activities or consulting on behalf of a charitable organization or nonprofit organization claiming to work on behalf of causes similar to those noted in the complaint. These defendants will also be banned from using robocalls connected to telemarketing, engaging in abusive calling practices, or making misrepresentations about a good, service, or contribution. The defendants will further be required to disclose when a donation is not tax deductible. The individual defendants also are required to pay $110,063,843 each, which is partially suspended due to the defendants’ inability to pay, while the two corporate defendants, along with two of the individual defendants, are subject to a partially suspended monetary judgment of $1.6 million.
FHFA extends Covid-19 flexibilities until April 30
On March 11, the FHFA announced the extension of several loan origination guidelines put in place to assist borrowers during the Covid-19 pandemic. Specifically, FHFA extended until April 30 existing guidelines related to: (i) alternative appraisal requirements on purchase and rate term refinance loans; (ii) alternative methods for documenting income and verifying employment before loan closing; and (iii) the expanded use of power of attorney to assist with loan closings. The extensions are implemented in updates to Fannie Mae Lender Letters LL-2021-03 and LL-2021-04, and Freddie Mac Guide Bulletin 2021-10 and Selling FAQs.
Treasury announces Emergency Capital Investment Program for CDFIs and MDIs
On March 4, the U.S. Treasury Department announced a new initiative to provide access to capital for communities traditionally excluded from the financial system that have significantly struggled during the Covid-19 pandemic. The Emergency Capital Investment Program (ECIP), established by the Consolidated Appropriations Act of 2021, will provide up to $9 billion in capital directly to Community Development Financial Institutions (CDFIs) and minority depository institutions (MDIs) to provide, among other things, “loans, grants, and forbearance for small and minority businesses and consumers in low income communities.” The ECIP will set aside $2 billion for CDFIs and MDIs with less than $500 million in assets, as well as $2 billion for CDFIs and MDIs with less than $2 billion in assets. Treasury notes that the program is intended to incentivize impactful lending, and states it is currently “developing additional ‘deep impact’ metrics to further incentivize targeted investments by participants in those communities most in need of capital.” Institutions seeking to participate in the ECIP can access application instructions and materials along with an application portal here.
To support the implementation of the ECIP, the FDIC, Federal Reserve Board, and the OCC issued an interim final rule to “revis[e] their capital rules to provide that Treasury’s investments under the program qualify as regulatory capital of insured depository institutions and holding companies.” The interim final rule is effective immediately upon publication in the Federal Register. Comments will be accepted for 60 days following publication.
FDIC announces Oklahoma winter storm relief
On March 3, the FDIC issued FIL-13-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Oklahoma affected by severe winter storms. The guidance notes that the FDIC will consider the unusual circumstances faced by institutions affected by the winter storms. The guidance highlights suggest that institutions work with impacted borrowers to, among other things: (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC notes that institutions “may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider relief from certain reporting and publishing requirements.
FTC settles with income scam operation targeting Latina consumers
On March 2, the FTC announced a settlement with a company and its owners (collectively, “defendants”) that used Spanish-language ads targeting Latina consumers with false promises of large profits reselling luxury products. The action—a part of the FTC’s “Operation Income Illusion” sweep (covered by InfoBytes here)—alleged the defendants violated the FTC Act by making false or unsubstantiated earnings claims when marketing work-at-home opportunities. The FTC also claimed the defendants violated the Telemarketing Sales Rule by, among other things, misrepresenting material aspects of the investment opportunities and routinely using threats or intimidation “to coerce consumers to pay Defendants, including but not limited to threatening consumers with damage to consumers’ credit history, false legal actions, and reports to federal government authorities.” The proposed settlement imposes a $7 million judgment, which is partially suspended due to the defendants’ inability to pay. The defendants are also permanently banned from (i) selling any goods or service that is represented as a means for consumers to make money working from home or elsewhere; (ii) making any deceptive claims about the risk, liquidity, earnings potential, or profitability of any goods or services, and making such claims through telemarketing; and (iii) using threats or intimidation to coerce consumers to pay for goods or services.